400 YEARS OF THE BRITISH EAST INDIA COMPANY INSIDE INDIA (by Huw V. Bowen)

Date: 8/27/2005

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400 YEARS OF THE BRITISH EAST INDIA COMPANY INSIDE INDIA (by Huw V.
Bowen)
///Wed, 24 Aug 2005
///
400 YEARS OF THE EAST INDIA COMPANY. ///
by Huw V. Bowen///
Huw V. Bowen asks whether the East India Company was one of the
`most powerful engines' of state and empire in British history.
///
THE YEAR 2000 MARKS THE 400th anniversary of the founding of the
English East India Company, the trading organisation that acted as
the vehicle for British commercial and imperial expansion in Asia.
For over two hundred years, the Company stood like a colossus over
trade, commerce and empire, and contemporaries could only marvel at
its influence, resources, strength and wealth. Writing at the
beginning of the nineteenth century, the political economist David
Macpherson was unequivocal in his assessment that the Company was
`the most illustrious and most flourishing commercial association
that ever existed in any age or country.'
Today even the most powerful firm pales by comparison in terms of
longevity and wide-ranging economic, political and cultural
influence. In an era before fast travel and instant communication,
the East India Company established a far-flung empire and then set
about governing, controlling and exploiting it from a great distance
in London. It managed to do this until it was finally rendered
obsolete by the tumultuous events surrounding the Indian Mutiny in
1857.
The Company was granted its first charter by Elizabeth I on the last
day of 1600, and it had to survive an uncertain first century or so
as it sought access to Asian markets and commodities. At home, it
was restructured several times, notably between 1698 and 1708 when
an `old' and `new' East India Company co-existed before merging to
form the United Company of Merchants Trading to the East Indies. In
the East, the Company came under such pressure from its Dutch rivals
during the mid-seventeenth century that it was obliged to shift the
main focus of its activities from the Malay archipelago and the
Spice Islands to South Asia. Over time, it managed to establish a
commercial presence in India centred upon three `presidencies'
established at Madras, Bombay and Calcutta. These tenuous footholds
were fortified and defended by the Company as it sought to
consolidate its position in an often hostile commercial and
political world. This in turn gave rise to the growth of a small
private army that was eventually to rival the regular British army
in terms of size and manpower. The Company's role in India was thus
defined by both commercial activity and a military presence: it was
considered legitimate to use force in support of trade, and the
overseas personnel were organised and deployed accordingly. In the
words of one contemporary, it was a `fighting company'.
By the mid-eighteenth century, the Company had begun to assert
itself over rival European companies and Indian powers alike, and
this placed it in a position from which it could begin to carve out
an extended territorial and commercial empire for itself. The
actions of men such as Robert Clive (1725-74), Warren Hastings (1732-
1818) and Charles Cornwallis (1738-1805) helped to transform the
Company from trader to sovereign, so that during the second half of
the eighteenth century millions of Indians were brought under
British rule. As William Playfair put it in 1799:
QUOTE
From a limited body of merchants, the India Company have become the
Arbiters of the East.
The Company created the British Raj, and as such it has left a deep
and permanent imprint on the history and historiography of India.
The story, once almost universally described as the `rise of British
India', not so long ago formed part of the staple reading diet of
British schoolchildren and students. In the post-colonial era, when
imperial history has ceased to be fashionable, the legacies of
British India are still hotly debated and contested. It is within
this context that the history of the East India Company remains to
the fore. Rather less obvious, perhaps, is the part played by the
East India Company in the domestic development of Britain. Indeed,
today's casual observer finds few signs of the leading role it once
played in the nation's business, commercial, cultural and political
life. In terms of architecture, for example, there is little
surviving evidence in London of the Company's once-extensive
property empire. The London docklands, home to the East India dock
complex, has been reshaped. Although Commercial Road and East India
Dock Road -- the purpose-built link with the City -- survive, the
docks themselves have been filled in and redeveloped, leaving only a
few poignant reminders of the Company's once formidable presence in
the area. To the West, the great fortress-like warehouses built by
the Company at Cutler Street were partially demolished and
refurbished in controversial circumstances during the late 1970s.
There is no trace remaining whatsoever of the Company's headquarters
in Leadenhall Street. Charles Dickens once described the `rich' East
India House `teeming with suggestions' of eastern delights, but it
was unceremoniously pulled down in the 1860s, and in its place today
stands the new Lloyd's Building, also a monument to commercial
capitalism, but displaying rather different architectural qualities.
In recent years, the only obvious local clue to the Indian
connection was provided by the East India Arms, a tavern in nearby
Lime Street, but that too has now fallen victim to the modern re-
naming and re-branding process. As a result, the East India Company
is now out of sight and out of mind.
It was not always like this. During the late eighteenth century, the
Company played a key role in London's economy, employing several
thousand labourers, warehousemen and clerks. Returning fleets of
East Indiamen moored in Blackwall Reach, before their Indian and
Chinese cargoes were transferred via hoys and carts to enormous
warehouses where they awaited distribution and sale in Britain's
burgeoning consumer markets. The profile of the Company in London
was always high and the eyes of many were on Leadenhall Street.
Political infighting at East India House regularly captured the
attention of the metropolitan chattering classes. The Company itself
was repeatedly subjected to inquiry by a Parliament uneasy about the
turn being taken by events in the East.
The Company's domestic tentacles extended well beyond London,
however, and its influences were widely felt across the south of
England. Provincial outposts were established in the form of the
agencies in ports such as Deal, Falmouth, Plymouth and Portsmouth.
Over the years the Company maintained camps for its military
recruits at Newport in the Isle of White, Warley in Essex and at
Chatham in Kent. Educational establishments were set up for the
purpose of preparing those destined for service overseas. During the
first half of the nineteenth century, the East India College at
Haileybury in Hertfordshire educated boys for the civil service,
while Addis-combe Military Seminary near Croydon trained military
cadets.
More generally, the Company touched many sectors of British society
and the economy, as some contemporaries acknowledged. In 1813, for
example, a friend to the Company, Thomas William Plummer, set about
identifying what `proportion of the community' had a connection with
the Company. Without mentioning several million purchasers of tea,
spices, silks, muslins and other Asian commodities, he listed
investors, Company employees of many types, tradesmen,
manufacturers, shipbuilders, dealers, private merchants, military
personnel and ship crews, before concluding that:
QUOTE
Scarcely any part of the British community is distinct from some
personal or collateral interest in the welfare of the East India
Company.
There was more than a grain of truth in what Plummer wrote, and by
the beginning of the nineteenth century many interests across the
country had been tied closely to the Company. This was particularly
the case with the several thousand or so well-to-do individuals who
chose to invest in Company stocks and bonds. For much of the
eighteenth century East India stock was the most attractive
investment available in the nascent stock market, not least because
it always paid out an annual dividend of more than 5 per cent. The
India bonds that provided the Company with its short-term working
capital were also highly prized, with one early stock market analyst
describing them as `the most convenient and profitable security a
person can be possessed of'. The fortunes of Company and nation had
become so tightly intertwined that they had begun to move in tandem
with one another as those who took a broad view of political and
economic matters were able to see. When the Company flourished, the
nation flourished. Equally, as Edmund Burke put it, `to say the
Company was in a state of distress was neither more nor less than to
say the country was in a state of distress'. Such logic dictated
that the effects of any crisis or catastrophe experienced by the
Company in India would be deeply felt in Britain and the wider
British Empire, and this was well understood by close observers of
the imperial scene. One pamphleteer wrote in 1773 that the loss of
India would occasion a `national bankruptcy' while the imperial
theorist Thomas Pownall suggested that such an event would cause
`the ruin of the whole edifice of the British Empire'. These
concerns lay behind the increased levels of government anxiety about
Company adventurism, misrule, and mismanagement in India that became
evident after 1760.
Late eighteenth-century concerns about events in the East reflected
the fact that the East India Company was no longer an ordinary
trading company. It had evolved into an immensely powerful hybrid
commercial and imperial agency, and after the conquest of Bengal it
fundamentally reshaped its traditional commercial policy based upon
the exchange of exported British goods and bullion for Asian
commodities. Instead, the Company concentrated its efforts on the
collection of territorial and customs revenues in northeast India.
The right to collect these revenues had been granted by the Mughal
Emperor Shah Alam II in 1765, an event which both confirmed British
military supremacy in the region and served to elevate the Company
to the position of de facto sovereign in Bengal and the neighboring
provinces of Bihar and Orissa. Thereafter, trade was used to
facilitate the transfer of `tribute' from Asia to London as surplus
revenue was ploughed into the purchase of Indian and Chinese
commodities for export to Britain. As Edmund Burke later remarked,
this marked a `revolution' in the Company's commercial affairs.
The Company's empire had now become self-financing to the point that
further military expansion could be sustained, but it was also
believed that generous payments could be made to domestic
stockholders and the British government alike. This proved to be a
vain hope, but the transfer of tribute helped to define the
essential characteristics of the late-eighteenth-century state-
Company relationship. Successive ministers declared the state's
`right' to a share of the Bengal revenues, but in return for the
promise of annual payments into the public treasury they allowed the
Company to continue in its role as the administrator, defender and
revenue collector of Bengal. This brought the British government the
benefits of empire without any expensive administrative or military
responsibilities. It was a welcome and convenient arrangement at a
time when the national debt was spiralling ever-upwards and parts of
the Empire, most notably North America, were proving increasingly
difficult to control and subdue.
By the 1770s the Company thus found itself as something akin to a
semi-privatised imperial wing of the Hanoverian state, with its
operations being defined by the dual pursuit of both private and
public interest. It was charged with the protection, cultivation,
and exploitation of one of Britain's most important national assets,
and contemporary observers described its new role accordingly. In
1773 the prime minister, Lord North, declared that the Company was
acting as `[tax] farmers to the publick', while a late-century
pamphleteer suggested that the Company had become `stewards to the
state'. In this scheme of things, there was a greater need for the
Company to become more accountable, efficient, and reliable, and
this desire lay behind the reforms embodied in North's Regulating
Act of 1773 and Pitt's India Act of 1784.
The Company's importance to the British state was not, however,
simply to be assessed in terms of its role as the licensed agent
through which metropolitan administrative, fiscal and military
influences were brought to bear upon the Indian empire. The Company
had been present at the birth of the eighteenth-century state during
the troubled period following the `Glorious Revolution' of 1688-89.
As a hard-pressed nation struggled to cope with the demands of the
Nine Years' War, ministers had drawn heavily on the financial
resources of the `new' East India Company that had received its
charter in 1698. This meant that when the United Company was
established in 1709 it was already deeply embedded in both the
public finances and the City of London where, together with the Bank
of England, it formed part of the `monied interest'.
The financial relationship between state and Company took several
different forms, all of which were a variation on a theme that saw
the Company's monopoly privileges periodically confirmed or extended
by the Crown in return for loans or payments made to the public
purse. Indeed, by the 1720s the entire paid-up share capital of the
Company, almost 3.2 [pounds sterling] million, was on long-term loan
to the state at 5 per cent interest. This sizeable advance was
extended to 4.2 [pounds sterling] million before prime minister and
chancellor Henry Pelham's restructuring of the national debt in 1749-
50 saw the reduction of interest payments to 3 per cent and the
creation of the East India annuities. This extensive underwriting of
the post-settlement regime was such that a Chairman of the Company,
Jacob Bosanquet, was later to borrow a phrase from Adam Smith and
declare that the Company, together with the Bank of England, had
become one of the `most powerful engines of the state'. As Chairman
of a company under great pressure from critics by 1799, Bosanquet
was hardly likely to say anything else, but his comments were not
altogether inaccurate. His organisation had established itself as a
cornerstone of the City of London, and as such it had played a key
role in supporting the state and public credit.
By the end of the eighteenth century, apologists were thus arguing
that the Company formed part of the very foundations of Britain's
state and empire, yet within sixty years it had ceased to exist at
all. What happened to make the great `engine' run out of steam so
rapidly?
There are a great many answers to this question but the most basic
one is undoubtedly the most important. Quite simply, in economic
terms the Company failed to deliver what it had promised since the
1760s. As the military and administrative costs of empire
multiplied, the Company proved itself unable to generate a revenue
surplus for transfer to Britain. A great many attempts were made to
remodel the Company's fiscal and commercial operations but successes
in one area were always off-set by failures and setbacks elsewhere.
Only the striking growth of the China tea trade offered the Company
any prospect of success, but that in itself was not enough to
satisfy the demands of profit-hungry stockholders and ministers.
Indeed, the annual flow of `tribute' to the state Treasury promised
by the Company in 1767 had dried up almost at once. By 1772 the
Company was teetering on the edge of bankruptcy, having failed to
master the complexities of its new role in India, and a degree of
desperation forced it into the measures that ultimately led to the
Boston Tea Party the following year. Thereafter, the Company
staggered from crisis to crisis, requiring government loans to
enable it to continue functioning. In effect, this meant that roles
had been reversed, and the Company had become dependent upon the
state for financial support.
A dose of economic reality, coupled with widespread metropolitan
unease about `despotic' Company government in India, caused many
commentators rapidly to reassess their views of Britain's eastern
empire. Nowhere was this more evident than with Edmund Burke who
became one of the Company's harshest critics and campaigned long and
hard for reform and the punishment of British misdemeanors in India.
Initially, though, Burke had been as captivated as any observer by
the prospect of Britain gaining very real material advantage from
the Company's successes in Bengal. He had outlined the economic
potential of India to the House of Commons in 1769 before concluding
that `The Orient sun never laid more glorious expectations before
us.' This type of view was commonplace during the 1760s, but it was
replaced by much gloomier assessments of the situation in the
decades that followed. Commentators soon tired of hearing about the
promise of Indian wealth being used to the advantage of the
metropolis, and began instead to expose the flaws that were evident
in the Company's calculations and methods. The figures did not seem
to add up, leaving one MP, George Tierney, to complain that `Our
Indian prosperity is always in the future tense'.
Criticism such as this only strengthened the case of those in
Britain who were campaigning vigorously for the East India trade to
be opened up to free competition. Just as the utility of the Company
to the nation began to be discussed, old mercantilist assumptions
about the organisation of trade were being called into question.
Taking a lead from Adam Smith, who had condemned chartered companies
as being `nuisances in every respect', critics exposed the Company
to searching analyses of its methods and practices.
Under such attack, the Company proved unable, indeed almost
unwilling, to answer the charges leveled against it. Although it
began to emphasize the contribution it made to intellectual and
scientific life in Britain, it failed to argue convincingly that it
alone offered the best way forward for the further development of
the Anglo-Asian connection. Part of the reason for this was that the
Company believed it had already taken the organization of its
commercial and financial affairs to the highest possible level. It
proved to be remarkably complacent and, together with a deep-rooted
institutional conservatism, this meant that any change was regarded
with the deepest suspicion. As one director of the Company put it,
`Innovations in an established system are at all times dangerous'.
Few friends of the Company could see any need to alter an
organisation that was thought to be beyond improvement, and this
case was restated time and again. Most would have agreed with Thomas
Mortimer who argued during the 1760s that the Company had `brought
the commerce and mercantile credit of Great Britain to such a degree
of perfection, as no age or country can equal.' To alter anything
would be to invite trouble. Sustained failure and. Disappointing
performance, however, flew in the face of such opinion, and this
ensured that pressure for change continued to grow from outside the
Company.
In the end, the Company's failure was essentially two-fold as far as
many of those in the metropolis were concerned. It failed to deliver
to Britain the great financial windfall that had been anticipated
after the conquest of Bengal; and because of this it was unable to
sustain much beyond 1760 its position as one of the major
institutional and financial props of the Hanoverian state. When
charges related to misrule, despotism, unfair monopoly practices and
a host of other complaints were added to the scales, they served
eventually to tip the balance of political opinion.
The immediate and outright abolition of the Company, however, was
never an option because the state did not possess the resources,
skills or will necessary to govern a large empire in India. Instead,
successive breaches were made in the Company's commercial position.
Trade with the East was opened up to a limited degree in 1793; the
Indian monopoly was ended in 1813; and the exclusive trade with
China was abolished in 1833. The Company survived for another twenty-
five years as Britain's administrative and military representative
in India, but by then it was a trading company in name only. The
Company had achieved the full transition from trader to sovereign,
amply fulfilling Adam Smith's prediction that trade and government
were incompatible within a 'company of merchants'.
The Company ended its days in the aftermath of the Indian Mutiny
when no case at all could be advanced for its survival in any form.
Its powerful legacy endured in India for many more years in the form
of the Indian army and civil service, but sight was soon lost of the
importance of its contribution to the development of the
metropolitan state and to imperial Britain itself. Today the Company
has been almost entirely removed from the geographical and
historical landscape and it has been more or less erased from our
national consciousness. As the 400th anniversary of the founding of
the Company approaches, this make it all the more necessary for us
to reflect on the deep, but now hidden, impression left on British
history by this quite extraordinary institution.
FOR FURTHER READING
H.V. Bowen, 'Investment and Empire in the Later Eighteenth Century:
East India Stockholding, 1756-1791', Economic History Review (1989);
K.N. Chaudhuri, The English East India Company: The Study of an
Early Joint-Stock Company (Cass, 1965); John Keay, The Honourable
Company: The History of the English East India Company (Harper
Collins, 1991); Philip Lawson, The East India Company: A History
(Macmillan, 1993); Martin Moir, A General Guide to the India Office
Records (British Library, 1996); Jean Sutton, Lords of the East: The
East India Company and its Ships (Conway Maritime Press, 1981).
Information about the records of the East India Company can be found
on the British Library's website http://www.bl.uk (follow the links
to the Oriental and India Office collections).
Huw Bowen is Senior Lecturer in Economic and Social History at the
University of Leicester and the author of War and British Society
1688-1815 (Cambridge University Press , 1998).
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